Fashion Shoe Company Bus 630

The Fashion Shoe Company has operated under a strict guideline on marketing their shoes. To make the store most appealing they chose to carry all their shoes at the same price. To increase sales the Company has decided to pay a small base salary and a nice commission of $4.50 per pair of shoes. In order for the Company to hit the break-even point the amount of shoes to be sold would be 12, 500. Since the sale price of each pair of shoes is $30.00 and the invoice cost is $13.50 and then add in the $4.50 commission, the profit equals $12.00. The Company then has to evaluate their annual costs of advertising costs of $30,000, rent equaling $20,000, and then salaries at $100,000. The sum of the annual costs equals $150,000.00. To put this cost into a monthly expenditure it equals out. (See Fig. 1)

If the 12,500 pairs of shoes to be sold fall short to 12,000 pairs of shoes the Company would suffer a loss of $6,000. This is a big failure for the Company to suffer and they would have to work diligently to improve their sales person’s efforts. (See Fig. 1)

Should the Company decide to pay the store manager of Shop 48 an incentive commission of $.75 per pair of shoes, in addition to the salesperson’s commission it would alter the break-even point by reducing the profit of each pair of shoes to $11.25 per pair of shoes and altering the break-even point to the sale of roughly $13,334 pairs of shoes. (See Fig. 1)

Should the Company choose to pay the store manager $.50 commission on each pair of shoes sold in excess of the break-even point of 12,500 shoes. In consideration, that the store sold a sum total of 15,000 pairs of shoes, which is 2,500 excess of the break point, the store manager would receive $1,250 in commissions leaving the Company with a profit of $1,250 over the break-even point. (See Fig. 1)

Should the Company decide to eliminate the sales commission and creating fixed salaries equaling out to $31,500.00, it would create a new break-even point in...